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Skill Asymmetries, Increasing Wage Inequality and Unemployment

  • Paul Auerbach
  • Peter Skott

    ()

    (Department of Economics, University of Aarhus, Denmark)

Using a simple model with two levels of skill, we assume that high-skill workers who fail to get high-skill jobs may accept low-skill positions; low-skill workers do not have the analogous option of filling high-skill positions. This asymmetry implies that a slowdown in Hicks-neutral technical change (or other adverse, skill-neutral shocks) may cause an increase in wage inequality, both between and within skill categories, as well as an increase in unemployment, especially among low-skill workers. Movements in productivity, unemployment and inequality may thus be linked to induced overeducation and credentialism.

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Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2000-18.

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Handle: RePEc:aah:aarhec:2000-18
Contact details of provider: Web page: http://www.econ.au.dk/afn/

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